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Thailand Monetary Policy December 2016

Thailand: Bank of Thailand keeps one-day repurchase rate unchanged at 1.50% in December

December 21, 2016

At its 21 December monetary policy meeting, the Bank of Thailand (BoT) unanimously decided to keep the one-day repurchase rate at 1.50%, as market analysts had expected.

The domestic economy has grown at a steady rate since the last policy meeting, but downside risks have increased, the Bank of Thailand stated. Inflation was expected to continue rising, although at a sluggish pace, andthe current accommodative monetary policy remains in place.

Activity in Thailand was steady overall, but differed across sectors. Bright spots were the acceleration in goods exports, thanks to consolidation efforts in the sector, and rising private consumption on the back of fiscal stimulus. Government expenditure remains essential for the economy’s momentum. Conversely, tourism and private fixed investment were subdued. Going forward, the Bank sees heightened potential headwinds in the economy, mainly from external uncertainties. The direction of U.S. trade policies, decelerating tourism from China as well as political developments in Europe could dampen foreign demand.

Regarding price developments, inflation climbed up moderately to 0.6% in November from 0.3% in October. The Bank stated that prices are expected to return within the target band of 1.0% to 4.0% in the first quarter of 2017. However, this will depend on the evolution of prices for fresh food and oil. The Bank added that volatility in the financial markets might increase in the future, which could translate into exchange rate volatility and greater capital flows. Against this backdrop, the Monetary Policy Committee reiterated its readiness to employ a mix of monetary policy tools that favor economic momentum and assure financial stability.

The next Monetary Policy Committee meeting is scheduled for 8 February 2017.

FocusEconomics Consensus Forecast panelists expect the one-day repurchase rate to end 2017 at 1.46%. In 2018, the panel expects the monetary policy rate to end the year at 1.72%.